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Dollar General upped its offer today to purchase Family Dollar Stores Inc., despite the Goodlettsville, Tenn.-based discounter having had its initial offer rejected.
In a letter sent to the Family Dollar board of directors, Dollar General CEO Rick Dreiling offered to purchase the company for $80 per share, up from $78.50 per Dollar General's previous bid made last month.
The new proposal represents $640 million in additional value over Dollar Tree's offer, and a 31.9 percent increase over the $60.66 closing price for Family Dollar stock on the day prior to the Dollar Tree announcement.
"We remain committed to completing a transaction that will provide [Family Dollar's] shareholders with superior value to the existing agreement with Dollar Tree and immediate and certain liquidity for their shares," Dreiling stated in the letter.
In an effort to further quell antitrust concerns, Dollar General also agreed to divest 1,500 of its stores, up from 700 in its original bid, which Dreiling said "provided more than sufficient cushion to clear any FTC review." Dollar General said it would also pay a $500 million reverse break-up fee. All other terms and conditions of the proposal remain unchanged.
“Even as a secondary antitrust review supported our previous proposal, we revised our offer to demonstrate the seriousness of our commitment," Dreiling said.
Family Dollar rejects Dollar General's $9.7B bid
As PG previously reported, Family Dollar rejected Dollar General's initial bid of $9.7 billion made on Aug. 18, citing antitrust issues, and renewed its commitment to its $8.5 billion deal with Dollar Tree.
Dreiling claimed that Family Dollar Chairman/CEO Howard R. Levine expressed interest in helming the combined company, and Dollar General declining the request deterred Levine from pursuing the bid.
In a response, Levine accused Dreiling of making "blatant mischaracterizations" regarding merger discussions the two of them had shared.
Not taking 'no' for an answer
"Not only is Dollar General not taking no for an answer, its revised proposal goes a long way to ensuring Family Dollar shareholders won’t have a reason to say no either," said Planet Retail Research Director Kelly Tackett. "The new provisions should mitigate any lingering concerns Family Dollar’s board has voiced around the antitrust hurdles. But it’s still far from clear that the board will endorse the new bid. "
Tackett also suspects "ensuing conversations will shed some light on Dollar General allegations that Family Dollar CEO Howard Levine sidestepped previous deal discussions out of self-interest."
Company representatives were not immediately available for comment.